Biggest Story of 2012: Implosion of H-1B Business Model

Don Tennant
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Just under a year from now, when 2012 is drawing to a close and the pundits are talking about the biggest tech story of the year - the one development that altered the IT landscape more dramatically than any other - it will be a relatively easy call. They'll use phrases like "game changer" and "the end of the IT services industry as we know it." The biggest tech story of 2012 - and perhaps the biggest business story of the year - will be the implosion of the H-1B visa-centric business model of the major U.S. and non-U.S. IT services providers.

 

The catalyst for the implosion will be universally identified as the courageous quest of Jay Palmer, a man whose technology and people skills made him a rising star within Infosys, the giant Indian IT services provider whose lifeblood for years has been the supply of temporary work visas that have enabled it to bring foreign workers to this country by the thousands. It will all center around the gut-check performed by Palmer when he refused to take the cowardly, self-serving route so many of his colleagues had taken by turning a blind eye to the visa and tax fraud that he found was rampant within his company.

 

The pundits will marvel at the resolve Palmer showed in October 2010, when his adherence to the company's whistleblower policy was met with shameless derision and inaction on the part of Infosys' management. They will recount how the visa and tax fraud lawsuit Palmer filed against the company in February 2011, sparked a criminal investigation by U.S. government authorities, unprecedented in its scope and rigor, as investigators from the Department of Homeland Security, Department of State, Department of Justice and the Internal Revenue Service joined forces to bring Infosys to account for its actions once and for all.

 


Finally, the talking heads will examine with newfound intensity the wholesale reinvention of the global IT services business model, as company after company is forced to halt its abuse of the visa system for fear of suffering the consequences that Infosys will have suffered at the hands of Lady Justice, who at long last has determined that enough is enough.

 

What will be forgotten, meanwhile, is how it all happened while Infosys, and those captivated by its power and influence, acted as if none of it mattered - indeed, as if they were convinced that the ramifications of the actions taken by Palmer and by his attorney, Kenny Mendelsohn, the "Alabama street lawyer" who proved to be as relentless as Palmer in his quest to bring Infosys to justice - would all be lost in an obscure footnote to the IT record of 2012.

 

As 2011 drew to a close, Infosys watchers, especially those in India, were almost completely oblivious to the game-changing nature of the legal problems that Infosys was facing in the United States. One glaring example occurred in a year-end interview with Infosys co-founder and chairman emeritus Narayana Murthy, when India's Deccan Chronicle asked him this question: "What do we need to do in 2012 to move away from crony capitalism and sweetheart deals towards a more just and fair society?" Read Murthy's response carefully:

We must all learn to live by a certain code of conduct, whether we are politicians or in the corporate sector. The question to ask is: Why is it that we have a system that encourages people not to behave in the right way? The reasons are very clear. In India, we don't have a speedy justice system; we don't have punishment that's many times the benefit one derives from wrongdoing; there's no encouragement to honest bureaucrats and politicians. Other societies have done this a long time ago.

The irony appeared to be completely lost on the interviewer. There was no follow-up question to find out how Murthy was able to reconcile his lamentation that "we have a system that encourages people not to behave in the right way," and that lacks "punishment that's many times the benefit one derives from wrongdoing," with the fact that he created and for decades oversaw a company that developed an institutionalized culture of visa and tax fraud in order to increase profits, and a practice of blatant retaliation against anyone who dared to challenge it.

 

I'm going to follow up on this theme with more examples in a subsequent post. The transformation of the Infosys watchers from being mired in oblivion to recognizing that Infosys' wrongdoing was the catalyst for what will be the story of the year, will be a fascinating one to watch as the new year unfolds.



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Jan 3, 2012 2:34 AM Dr Gene Nelson Dr Gene Nelson  says:

I too appreciate the courage and persistence of Jay Palmer and his Attorney, Kenny Mendelsohn.  I sincerely hope that they can overcome the cultural history of India, which appears to depend heavily on bribes and "connections."

However, the problem is not confined to India. Corruption is strong in the United States as well. This is the point that I make in my 2007 investigative report, "The Greedy Gates Immigration Gambit."  See tinyurl dot com forwardslash 37l8ry or search on the title and select the more readable PDF version.  You will learn of the role of corrupt Microsoft lobbyist Jack Abramoff helping the corporate behemoth to procure 3 "Microsoft-friendly" changes to H-1B Visa law between 1995 and 2000. Of course, having Microsoft expend about $100 million dollars in so-called politically-connected expenditures is likely a factor.

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Jan 3, 2012 2:37 AM SealTeam6 SealTeam6 SealTeam6 SealTeam6  says:

I would hope something positive came out of this but when I see articles like the one referenced below I wonder if anything will happen.

http://www.thedaily.com/page/2012/01/03/010312-news-immigration-strife-1-3/

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Jan 3, 2012 2:39 AM Jake_Leone Jake_Leone  says:

I certainly hope InfoSys can change.  15 years ago, I worked for a major Japanese electronics/software company for several years, and found that the management at that company was not out to game the visa system, and did in fact hire predominantly local candidates.  We were very successful in designing and creating enterprise level systems that are still in use.

Well at the time, in Japan, engineers were at near full employment so there was a motivation to use U.S. engineers.  For that reason, I don't think companies (like InfoSys) are sufficiently (monetarily) motivated to actually obey the law.  Stiffer penalties and actual prosecution are the only way to get companies to comply with the spirit of the laws (because the laws themselves have no real protection for U.S. citizens), but even then they might not.  The monetary cost to our country in lost taxes and unemployment insurance should be enough for use to realize that we are all being ripped off by companies that use the U.S. Visa system as their only method for finding candidates for jobs on U.S. soil.

There are many situations where Visas are abused.  For example, it's easier to make a call to HR (to get a visa) than to actually do interviews of local candidates.  If your company has an office overseas, you can have the people there do the interviews, or even bring over people from your foreign office on H-1b or L-1.  All far cheaper than the cost of finding and paying the salary of a local U.S. candidate.  Companies need monetary motivation to actually obey the law, 2-3k (even it was 10k) in visa fees is nothing compared to the cost savings of paying someone 50% (L-1), 25% (GAO), or (even 10%) less (over six years for H-1b) for a candidate on an H-1b or L-1.

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Jan 3, 2012 3:27 AM R. Lawson R. Lawson  says:

Jay Palmer, his attorney, and Don Tennant deserve credit for their role in this story.  Jay did what many - if not the vast majority of people - are not willing to do: stand up for what is right.  His attorney has represented his client at least publicly very well, and Don ran with a story many in the media ignored.

So thank you to all those involved, and especially Jay who continues to have his career placed on hold and his reputation tarnished because of the libelous and illegal actions of Infosys.  I hope that Jay will be adequately compensated for his ongoing losses, and that Infosys will be punitively punished.

As to the "H-1b business model", the H-1b was never meant to become a "business model" in and of itself.  It is a shame that it has become just that. 

This is a model that immigration legal practices love and many specialize in, that offshore outsourcing firms depend on, and that has enabled the commoditization of the IT labor market.  A market where companies have such a vast supply of labor they can pick and choose what professional they pull off the shelf while having no incentive to invest in training or the profession's future.  If a worker isn't a perfect fit at a given moment in time, they are simply replaced them with someone who is.

This is a business model that has double digit fraud rates and average salaries below the salaries of their American counterparts - despite what immigration attorneys or nefarious groups like NFAP want you to believe.

The bottom line is that immigration should complement the American workforce, not replace us.  Immigration should not be driven by business interests, but rather our national interests.  When a corporation has the right to pick and choose our future citizens, we have a problem.  That is exactly how the H-1b visa works.  Corporate middle-men are deciding who is deserving enough to live in this country.

We need to take that power away from corporations and we need to remove immigration from our trade agreements!  Immigration is too important to our nation's future to turn it into a "business model" or a temporary staffing pool, and immigrants are people that shouldn't be traded like cattle. 

Because of the WTOP/GATT we can't even reduce or modify the current 65,000 cap until we modify or withdraw from that treaty without a WTO challenge.  Our "leaders" even traded away our sovereignty!  We want it back.

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Jan 3, 2012 4:30 AM hoapres hoapres  says:

While I hope that I am proven wrong, nothing is going to change.

If this story was as big as claimed then the NY Times, Washington Post, msnbc, fox news, cbs news, abc news, etc. would be all over it and everyone would know about it.

The "big boys" being those in charge want the H1B business model and won't accept a change.  Politicians follow the money and the money is with big corporations.

This story is going to get buried and nothing changes.

Sounds cynical and it is to which I hope that I am proven wrong.  If history is any guide then I am likely to be proven right.  The H1B business model has been going on for over 20 years and the Palmer Story is really old news.  Nice to see Palmer make an issue.

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Jan 3, 2012 5:02 AM EngiNERD EngiNERD  says:

hoapres  says: While I hope that I am proven wrong, nothing is going to change.

If this story was as big as claimed then the NY Times, Washington Post, msnbc, fox news, cbs news, abc news, etc. would be all over it and everyone would know about it.

So correct HOARERS is!     Abuses,  scandals in the H-1B  program  have going on for years!   ... and what has been the outcome?   OK there have been a few  stories in the tech  press  but  by and large the manistream media has ignored this issue.   Why not do a GOOGLE  news search and see  how many stories in the major  media there on  INFOSYS?

From my archives going  back many many  many years:

The scandal you are not hearing about:

http://www.etherzone.com/2002/jack102102.shtml    removed  but posted at

http://www.americanreformation.org/Articles/GlennJackson/EnronandH1BVisas.htm

Is Anybody out there?

Is Anybody listening?

www.rense.com/general35/wakeupNHwakeup.htm

What  abuses,  scandals in the H-1b  program do you recall?

I believe the  list is  long.  What will make the INFOSYS  case different?

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Jan 4, 2012 1:34 AM BeeKaay BeeKaay  says: in response to EngiNERD

And where was the big news about Cohen and Grigsby?   Oh yeah, that was buried back in 2007 as well.

Hoapres is right.

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Jan 4, 2012 1:57 AM Bob Bob  says:

Every single candidate for the 2012 Presidency, favors MORE h-1b visas.  There are NO exceptions, not Obama, not even Ron Paul - none.  In 2008 when the economy didnt look as bad, at least there was Tancredo.

Even after all of this, and 3 years of very high unemployment following a lackluster decade, and crisis levels of debt for stimulus to 'create jobs'.

You'd think this would put an idea in at least one candidate's head 'hey, maybe we shouldnt increase the rate of replacing our own workers with foreign.  Every single one of them has been approached by citizens several times about this, it's been documented by leaders in their parties, Grassley and Durbin.

But no.  None  ALL favor INCREASING H-1b visas.  That's where we are.  There seems to be absulutley no level of fraud, abuse, unemployment, national debt, foreign economic canabalization that would make them question this program.  So I remain skeptical until at least one candidate questions it.

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Jan 4, 2012 2:49 AM EngiNERD EngiNERD  says: in response to Bob

Minor Correction to  Republican candidates supporting H-1b's 

Any one recall  Congressman  Thaddeus McCotter?  He was runing for the Republican  nomination  very  early  on.  The media  never  gave him a chance and he quickly  dropped out.  He  had  NO support,   probably  no  money.

But check out his stance  Immigration   and on H-1B  visas!   

http://immigrationstance.diggersrealm.com/mi/representative_thaddeus_mccotters_record_on_immigration_reform_and_illegal_aliens.html

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Jan 4, 2012 6:51 AM Dolores Dolores  says: in response to EngiNERD

The displacement of American breadwinners is not a side effect of the Indian IT business model. It IS the Indian IT business model. We can expect much howling from them as time goes by.

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Jan 4, 2012 7:02 AM Joe Blocks Joe Blocks  says: in response to hoapres

Yep, Hoapres is right. The tatas and the rest keep on truckin'

Just check out trackitt.com to see how alive and well H1Bs, L1s are

Don has changed tactics

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Jan 4, 2012 7:37 AM twins.fan twins.fan  says: in response to hoapres

Hoapres may be right.  In my opinion the event that will prevent the prediction of hoapres from becoming true is for more Americans to show the courage of Jay Palmer and his attorney, Kenny Mendelsohn.

We need more Americans to stand up to this injustice.  Yes we have laws that will prevent this injustice, but we need more people to stand up to this injustice to make them be inforced.

When Microsoft lays of thousands of US STEM workers year after year to make room for cheap entry level H1B workers, we need US STEM workers to stand up and say NO!  When Google carefully crafts a narrative of smearing US STEM workers by conducting fraudulent job interviews, we need US STEM workers to stand up and say NO!  When IBM moves their jobs from the US to India, we need US STEM workers to stand up and say NO!

When the billionaires from Microsoft, Google, Oracle, Intel, etc,  who have made their billions by a campaign of labor arbitrage, bribe our political leaders, like Barack Obama, Bill and Hillary Clinton, and Chuck Schumer to abandon the core principles of the Democratic Party and abandon US workers, the US STEM workers have to stand up and say NO.

The US STEM workers have to stand up for themselves.  No one else can do it for us.  Thanks to Jay Palmer and his attorney, Kenny Mendelsohn, for giving us a powerful example.

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Jan 4, 2012 8:15 AM jobs4US jobs4US  says:

The story that will most benefit the USA in 2012 - reform corporate visa laws and eliminate loopholes to REQUIRE employers to hire American talent FIRST before hiring offshore for US jobs.

Imagine how many jobs would be created without adding a dime to the national debt with just a signature?  

Indian companies are riding the tide of visa fraud and corruption created by Americans - specifically Bill Gates, Jack Abramoff, and a US Congress that passed corporate visa laws that allow corporations to legally discriminate against American talent.

It's high time that WE the PEOPLE occupy H-1b visa laws and ensure that Americans get a fair chance to compete for jobs in our own country.

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Jan 4, 2012 9:44 AM EngiNERD EngiNERD  says: in response to twins.fan

Want   another   "BIG STORY"    going  back to 2004 that was NOT widely reported?    In fact there was  hardly  any  coverage!

GOOGLE:    "Kevin Flanagan"    Bank of America

See what turns up.

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Jan 14, 2012 9:45 AM Phil Phil  says:

the "biggest story of 2012"??? 

Are you guys that desperate for something sensational?

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Jan 11, 2013 7:58 AM Odumbo Odumbo  says:
I was just wondering. Infosys reported a great quarter. So whatever happened to this "biggest story"? See, this is what a lot of us have been telling all along. The best part was to see the lemmings vouch for democrats...as if they care. Reply

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